Emerging markets - the biggest economic event in history

on Wednesday December 5, 2012 @ 11:38

We were very pleased to hear the UK Marketing Society decided to dedicate part of their annual conference to the potential of emerging markets for Western brands, a topic we have championed many times.

Although we didn’t attend the conference, as it was a member only event, we followed it avidly on Twitter, below is a summary (provided by Warc) of the key points Peter Haden, a partner at McKinsey consulting presented to delegates, along with a selection of tweets from the audience.

Haden opened by describing emerging markets as "the biggest economic event in history", bigger than the Internet or World War Two. But, he said, the challenge for Western brands was to change their capability to take advantage of it.

Haden then went on to talk about the shift of incomes and economic power towards the global south and east. The consultancy estimates a vast realignment of resources: world consumption will rise from $38tr to $64tr from 2010 to 2025; over that period, fast-growth markets' contribution to this annual total will rise from $12tr to $30tr.

But western brands remain
poorly placed to capitalise on this opportunity, with the world's biggest
brands – almost all from the US and Europe – only taking a 17% share of
emerging market sales today.

In short, Haden, said, "our companies are being left
behind in the biggest opportunity in history". And even if these western
brands catch up, they might find the "new normal" a harsh environment
to live in. Firstly, Haden said, they will need to deliver much more at much
lower prices, and second they will need to "give local marketers much more
freedom" to tailor brands.

That said, there are some bright spots in these gloomy prospects. For one thing, consumers in emerging markets are much more amenable to recommendations from friends and family – with 93% Egyptians and over 70% of Chinese consumers saying that this influences their purchase decisions compared to 29% of their British counterparts.

This suggests that firms who have the knack of attracting positive word-of-mouth are well-positioned to tap emerging markets.

More broadly, Haden pointed out that British "soft power" is not quite spent. The land of the Beatles and Harry Potter can still succeed on the global stage. "Our brands travel extremely well," he added. "We have cultural influence. And we've been at this a very long time."

Researching an Emerging Market

If you’re thinking about launching a product in an emerging market, we’d strongly advise you research the local market thoroughly first, as there is lots of variables you need to consider. Get in touch with use for more information and advice on carrying out research in developing markets.